hey guys check out this highly interesting article on the cut throat rivalry in us defence market for a stake in india's mrca market.
http://timesofindia.indiatimes.com/articleshow/1522915.cms
ST. LOUIS, MISSOURI: In a military and arms sales career spanning three decades, Michael Devers seldom had India on his radar -- until 2005. A senior executive with Boeing's Integrated Defence Systems (IDS), the lesser-known arms division of the giant airplane maker, Devers traveled far and wide-- Korea, Japan, Middle-East, Australia -' hawking the latest American military wares to US' allies and friends. But rarely ever to India, which resolutely bought arms from the Moscow, Washington's Cold War rival, and Europe.
Then one day it began changing. Early last year, a top Boeing executive received a phone call from Secretary of State Condoleezza Rice's office. The US was going to finally clear the sale of F-16s (made by Boeing's rival-in-arms Lockheed Martin) to Pakistan. But the Secretary was keen to offer India more advanced F-16s and even newer Boeing-made F/A-18 Super Hornets in keeping with the strategic shift in the region. Was Boeing prepared for that?
"We were all stunned," another Boeing executive, who asked not to be named because of the sensitivity of the exchanges, recalled. "This is a new generation combat aircraft that we have not sold to our closest allies. Outside the US Navy, no one has it. Yet here was the Secretary asking if we were ready to sell to India and also ready for joint production." Boeing's reply was swift: Sure thing.
In mid-March 2005, Rice traveled to New Delhi for what would only later be revealed as a path-breaking visit ' of the kind Henry Kissinger made to Beijing in 1970. Amid a raft of issues that would dramatically redefine US strategic interests in Asia, Rice not only sounded out Prime Minister Manmohan Singh on the nuclear deal, but also suggested India not be too worried about US supply of F-16s to Pakistan because India could have its pick of US arms from here on.
The US was keen on a whole new security architecture in the region, a goal that was written into a ten-year military pact signed by the two defense establishments in June when Pranab Mukherjee visited Washington.
Two weeks after the Rice visit, Philip Zelikow, her policy advisor in the State Department, summed up the tectonic shift in US policy in the following words: "(The US) goal is to help India become a major world power in the 21st century. We understand fully the implications, including military implications, of that statement."
The statement was music to the ears for the folks at Boeing, and indeed, every other American arms maker such as Raytheon, Northrup Grumman, Lockheed Martin and General Dynamics. It was also the sound of cash registers ringing. Long out of bounds for America's notorious "military-industrial" complex for a variety of reasons, including sanctions, New Delhi had been fertile stomping ground for Russian and European arms dealers for years. Suddenly, Washington had thrown open the barn door and Americans could get into the scrimmage -- with, as some US firms like Boeing believe, far greater traction and advantage.
The reason for US relaxation of arms sales to India is clearly as much commercial as strategic. India's defense expenditure has climbed steadily over the past few years, current standing at $ 20 billion a year.
Although that's only a fraction of the $ 460 billion US spends and a quarter of China's $ 80 billion, it is expected to keep increasing as India looks to fulfill its potential role as a global power. In fact, India's defense expense is abysmally low when looked at in per capita terms (where Israel is by far the highest).
With each increase in India's defence budget, there has been a frisson of excitement in the world's arms bazaar as New Delhi has tried to upgrade its military.
No single item caused more animation in 2005 than the announcement that the Indian Air Force was looking for 126 Multi-Role Combat Aircraft (MRCA) to supplement its fleet, where the mainstay is the aging and disaster-stricken MiGs. And the ripple reached as far as St.Louis, Missouri, a once-great Midwestern city --home to Boeing's IDS and the center of its F/A-18 Super Hornet manufacturing facility -- that is a pale shadow of its former self. And it was to St Louis that the Indian media from Washington was press-ganged (we joked) last week for a surprising sales pitch.
Typically, every great city in the world, even pretenders to greatness, has a central historic monument. St.Louis' monument is the Jefferson National Memorial Expansion, a massive steel arch (603 feet high) which commemorates the start of the Lewis and Clark expedition that resulted in the westward expansion of the United States as envisaged by its founders.
For the longest time, Boeing's interests too have lain west, riding on its better known commercial airplane division headquartered outside Seattle in the Pacific Northwest. Boeing's revenues derive broadly half and half from its military and commercial divisions. One striking feature is that whenever there is a downswing in commercial aircraft sales, the military sales go up, as it did after 9/11, attesting to the theory that arms makers thrive during wars. Things have since improved dramatically on the commercial side too, and last year, Boeing trumped its rival Airbus in sales helped in small part by $ 7 billion order from Air India.
The story of Boeing's military sales to India though is less exciting, or non-existent. Although 90 per cent of its $ 30 billion arms sales last year came from domestic US orders, the remaining ten per cent revenues came mainly from Japan, South Korea, other such favored US allies. Meanwhile, St Louis itself is seen as city in decline (it is also the headquarters for Monsanto). Boeing's workforce here has declined from around 50,000 at its peak to 16,500. The city's biggest employer now is Barnes-Jewish Hospital with 27,000 personnel on its rolls.
When the Bush administration unlocked the door for military sales to India, the delight at Boeing IDS was as great as if the Cardinals, the city's pride in baseball, had won the World Series, even though there are many miles and years, twists and turns, to go before the final innings. Clearly, Boeing officials have surmised that India could be crucial to their bottom line and Missouri's economic health, a point emphasized by the alacrity with which the state's Senator Kit Bond dashed off to New Delhi soem weeks back and announced his support to the nuclear deal as a virtual quid pro quo -- to the military purchase.
After years in the stock market doghouse when the tech fever swept the world, Boeing stock had made a comeback (from $ 33 pre-9/11 to $ 84 in recent days). If they snagged IAF's 126-combat jets order, potentially one of the world's biggest arms deals worth around $ 7 billion, it could open up a cornucopia. And it would just be the start of a relationship with a country expected to buy tens of billions of arms over the next couple of decades.
In Boeing's eyes, its IDS has a whole array of products that should be of interest to India. The Super Hornets, the T-45 Goshawk trainer jet, giant transport jets such as the C-17, the rejuvenated P-8A weaponised maritime surveillance planes, Apache and Chinook helicopters, mid-air refueling tankers, even rockets and satellites is part of their inventory.
At a Boeing executives meeting soon after the Bush's strategic ambush of India last year, the question was raised as to who was best equipped to explore the Indian market. "I think I ducked under the table," Mike Devers chuckles at the recollection. "I had last been to India in the 1980s to sell some minor stuff to BEL and India those days was not an enjoyable experience. You are talking to a guy from Southern California who loves the beaches and golf."
Still, as one of its most experienced executives who had done the Asia beat, Devers was chosen for the India project. And so off he went, to the cauldron called New Delhi in June last year, a trip he has made every month since then. When he is not making presentations to Indian military planners about the virtues of Boeing arms, he is culling weather report headlines: Last summer, when the temperature hit a bracing 47 deg C, he sent home a headline which said "It's raining heat from hell.' Indeed, the heat is on Boeing to bag the India MRCA deal because it starts with as many handicaps as advantages, as we will see next.
Boeing's dogfight for the 126-combat jet India contract involves half a dozen arms makers across the world. But the first scrape begins at home in the US. When Condoleezza Rice, dubbed the 'warrior princess' in peacenik quarters, offered India both F/A-18 Super Hornets and advanced F-16s, she set off a minor spat between Boeing and Lockheed Martin.
(The four other contenders for the deal are Dassault Aviation of France with the Mirage 2000-V, SAAB of Sweden with the JAS-39 Gripen, RAC of Russia with the MiG-29 MRCA and the British-German-Italian-Spanish consortium with the Eurofighter Typhoon. With New Delhi slated to issue its Request for Proposal (RFP) sometime in the next few weeks, you will find a lot of these nationals in New Delhi's swank hotels and bars.)
Boeing and Lockheed, like all American arms makers, share an unusual relationship. They are rivals in a sense, but they also collaborate on many projects, such as the one for the F-22 Raptor Stealth Fighter. The F/A-18 itself is a piecemeal jet – the airframe is made by Boeing IDS and Northrup Grumman, the engine by General Electric and the radar by Hughes. Beneath the veneer of civility and cooperation, US arms companies are only too ready to shoot each other down – without taking aim.
Boeing IDS officials will tell you why the F/A-18 Super Hornet is the best choice for India. It is a twin-engine MRCA, it is an F/A (for fighter/attack), and can be made for navy and air force). It has a long upside life, with orders from US Navy going into 2016 with ever newer technologies. F-16s? It's the end of the road for that fine plane. Even the USAF does not buy them any more, and once the order from the F-16-obsessed Pakistanis is fulfilled, Lockheed will close the assembly line in Texas.
Indian military planners hear all this with karmic élan, knowing that in New Delhi's scheme of things, a RFP today might mean acquisition a decade down the line, if at all. In any case, in the words of one senior IAF official familiar with the activity around MRCA acquisition, Boeing starts at bottom of the pile, for several reasons.
First among them is the famed unreliability of the American political system, as the Pakistanis found to their horror with the supply of F-16s. Then there are legacy issues: the IAF is long used to Russian systems and although its inventory has increasingly grown wider why add American to the mix now? And whatever happened to the indigenous LCA? Most of all can we really afford $ 7 billion for jets that cost around $ 53 billion apiece?
Boeing officials smile benignly at such questions, proffering answers that sound like they are selling large tractors rather than lethal jets that could raze towns and cities some day. They speak of joint manufacturing, using India's talent pool, and above all, interoperability with US systems and forces.
They speak of their investments in India, the $ 5 million a year for IISc, the $ 100 million maintenance and training hub in Nagpur. They use the word 'offset' – euphemism for investment -- quite often. And of course, there is the subtle hint that they are pulling their weight in getting the US-India nuclear deal through.
In March this year, a group of Indian test pilots was visiting US as part of the increasingly frequent military exchanges between the two countries. Although a visit to Boeing IDS was not on their itinerary, Boeing executives managed to get them to spend a day at St. Louis, where they were given a flight test review of the F/A-18 E/F and a tour of the production facility, besides a briefings on the P-8A. Indian pilots were also walked through the T-45, on which they will begin training on in Pensacola, Florida starting June this year. "The transparency was amazing considering they are non-starters going into this," an airman from the group told TNN.
